Starting assembly in Pakistan: Lucky Cement to partner with South Korea’s Kia

Pakistani company will set up new entity to start manufacturing, assembling Kia vehicles

ISLAMABAD: South Korean carmaker Kia Motor Co will start assembling cars in Pakistan, according to a local partner that is planning to invest Rs12 billion to set up a plant and manufacture the Kia vehicles.

Pakistan Stock Exchange (PSX) - listed Lucky Cement, which is part of the vast conglomerate Yunus Brothers Group, said in a statement on Thursday it planned to set up a new company to start “manufacturing, assembling” Kia vehicles.

It was not clear how much capital Kia itself would invest in the venture.

Representatives for the South Korean company could not immediately be reached for comment.

Kia cars had been assembled by Pakistan in the past but disappointing sales led to a halt in manufacturing.

The new venture will also market and sell, besides import and export of, “all types of Kia vehicles, parts and accessories,” Lucky Cement told the PSX in a statement.

Kia’s re-entry into Pakistan will boost government efforts to shake up the Japanese-dominated car market and loosen the grip of Toyota, Honda and Suzuki, who assemble cars in Pakistan with local partners.

Last month, French carmaker Renault agreed to invest in a new factory in Pakistan and officials say they are talking to several other carmakers.

The government believes increased competition should bring down exceptionally high car prices in Pakistan, and in March it introduced a new auto policy favouring new entrants into the market by offering incentives.



The incentives have angered existing market players, some of whom have said publicly they should get similar terms.

Pakistan, with a population of nearly 200 million people, is a potentially huge market, but just 180,000 cars were sold in the 2014-15 fiscal year. That compares with more than 2 million passenger vehicles a year in neighbouring India.

However, Pakistan’s auto industry seems to be in revival mode as a number of international brands have expressed interest to operate or expand their existing business.

Last month Audi AG expressed its interest in setting up an assembly plant in Pakistan and, through its authorised importer in the country, submitted a letter of intent to the Board of Investment (BoI) for consideration.

Similarly French automobile manufacturer Renault has also announced that it will start assembling cars in Pakistan by 2018

BoI Chairman Miftah Ismail said the company will invest $100 million to expand the capacity of Ghandara plant where it will assemble the vehicles.

Additionally, German carmaker BMW, in a bid to expand its business, is making efforts to increase its presence in the country through the launch of intermediate and low-end models.

Lucky Cement’s role

Meanwhile, following the announcement, Lucky Cement’s stock closed up 5% at Rs815.32 from Rs776.50 at the start of the session.

According to Topline Securities, Lucky Cement’s venture is a lucrative opportunity for the company to exploit a growing local automobile industry.

Experts believe the current status of Pakistan’s car penetration of 13 vehicles per thousand persons is significantly lower than the regional average of 162 and therefore there is a strong potential for automobile growth due to higher disposable income and low interest rate.

(With additional reporting by our correspondent)

Published in The Express Tribune, December 9^th, 2016.

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